Delivering Stability in the Renewable Energy Transition

Troubled German utility group Energie Baden-Württemberg AG (EnBW) has announced that it intends to shut down a total of four fossil-fuelled power plants as a result of the increasing volumes of renewable energy capacity in the country’s energy market.

With renewable energy given priority in the despatch merit order, this, the company argues, means that fossil-fired facilities are frequently being operated solely as ‘marginal capacity’ — during periods of peak power demand or when renewable energy outputs are low. This results in a drastic fall in revenue, it adds.

Highlighting the challenges facing gas-fired power stations, EnBW also says that given current electricity market prices, older coal- and oil-fired power stations can no longer cover their full operational costs. Consequently, it has decided to close thermal units with a total capacity of 668 MW at sites in Marbach and Walheim.

While this is clear evidence that the penetration of renewable energy is seeing a real shift in the profile of Germany’s generation mix — naturally to be applauded in the round — it of course also illustrates one of the biggest challenges facing the utility player in today’s European electricity market. It’s widely accepted that the economic stranding of half of Europe’s generation fleet has in no small way contributed to the plunging market capitalisation seen in the sector over recent years.

It therefore makes sense that, in the absence of a market mechanism which can support the commercial case for thermal capacity and other flexibility measures which are used only relatively rarely, significant volumes of older, less efficient thermal capacity will inevitably be decommissioned.

At face value this is a good thing.

But ironically these older plants will probably be joined by more expensive, though far more efficient, modern gas-fired installations, which are struggling to compete in the face of high wholesale natural gas prices delivered into Western Europe. Perversely, current market conditions are apparently seeing older lignite-fired stations running at higher capacities, while far more CO2-friendly gas plants are languishing.

Furthermore, without intervention it seems likely that this process of decommissioning more expensive installations will likely continue. Potentially, stability margins may become so thin that they are unable to cope with a significant variation in renewable energy capacity output — at which point the lights go out. This would be a bad thing.

One nation attempting to address this issue is the UK, which along with revealing its renewable energy strike prices also recently unveiled plans for a capacity market. Due to come into operation in 2014, following the enactment of a new raft of energy policy later this year, the Department of Energy and Climate Change (DECC) says the measures to bring on gas and other flexible electricity supply are designed to reduce risks to security of supply from winter 2018.

According to the department, existing generators and investors in new plants or other services, such as demand-side response, will bid to provide the total forecast electricity capacity and, if successful, would receive a steady payment in the year they agree to make that capacity available.

Under the terms of the proposals, they will be obliged to deliver electricity in periods of system stress or face financial penalties. Meanwhile the costs of the capacity agreements will be met by suppliers, and ultimately consumers.

The logic behind this capacity payment scheme could be questioned on a number of fronts — not least that, so far, few firm details have emerged, or that consumers are effectively paying fossil plants just to hang around doing not much most of the time. Nonetheless, the requirement for a stability mechanism is evident.

As the cumulative capacity of variable output renewable energy generation continues to grow, it is essential that this transition is managed effectively to ensure overall system integrity. And by also delivering a market mechanism, a capacity payment at least opens the door on accelerated development of alternatives to Option A: idling gas turbines providing spinning reserve.

It’s to be hoped that any such measures deployed on a wider scale wouldn’t preserve the belching oil-fired horrors lurking in the antique recesses of Europe past their due date. But perhaps more importantly, in addressing the stability issue, in theory at least, such a market also gives an investment boost to a range of emerging ‘clean’ technologies. Primed as major contenders are storage, load shedding, smart grids, multi-national trade and transmission and a host of other effective grid/generation capacity/load management tools.

These are the tools which are vitally needed to fully and reliably integrate vast volumes of renewable generation into national infrastructures. And, ultimately, these are the tools needed to build a 100 percent renewable energy future.

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This response is overdue here. Thank you for great responses. Never IS a long time. :) I absolutely agree with you both and concede your point is correct and well taken. I am critical of the use of “hyperbole” in these discussions and I criticize myself for at least appearing to use it here. The following is what “never” means to me and what I should have said. Affordable, technically viable grid level storage will never happen before—repeat before—it is desperately needed. The Germans needed lots of it probably 5 years ago. To my knowledge they have installed virtually none. The big problem is that it is needed right now in the US to start integrating it with the larger amounts of renewable source infrastructure starting to penetrate the grid. Simply saying and hoping that it will be here someday doesn’t cut it. Case in point is the current estimated up to $3,000,000,000 mandated storage by 2020 in CA discussed in the Bloomberg article here of 6-13-13. Please read my comments their estimating how small that amount will likely be for that high price.

To embark on a similar exercise here and to point out how far we really are from affordable storage, I was hoping someone would multiply the numbers out based on the cost of that Notrees facility, maybe based on a very conservative 200,000MWh (1/3rd of daily 24hr consumption in CA) needed each night on a grid highly utilizing renewables, while the sun was down and low capacity wind was adding not very much to the grid. Did anyone do that? For example, 200,000/24 = 8,333. So an equivalent of 8,333 of those battery plants would be needed. So, 8,333 x $44,000,000 = $366,652,000,000. That is over 1/3 of one trillion dollars! For California alone! Does that give anyone pause? Total installed cost of that facility was just over $1800 per kWh. I’m well aware of pronouncements of coming $400 or $200 per kWh battery prices, but we’re not there right now—we need it now, and so “did” Germany. Remember, approach infrastructure (roads), housing facilities, switching equipment, software solutions for control, etc. must be added to any battery facility. Any reduction in price because of large facilities and an economy of scale factor will still not matter a bit with numbers this high.
And RE the Poles, simply saying that they should be “kinder and gentler” and find a way to utilize the power that will destroy their grid also, unfortunately isn’t happening. Why should they let that happen if it’s not technically viable for them and/or causes them to saddle their citizens with this financial burden? In my discipline of engineering, these things are risk assessed before implementation, not after we rushed to a solution we had not thought through.

RE “load shedding”, I will stand on my statements. Load shedding means only one thing in power utility vernacular, at least in the US—desperate, controlled emergency shutdown of ever larger numbers of sub-circuits in the grid until stability is reached. Every person reading this blog has undoubtedly succumbed to it. You should not be using that term unless everyone here is okay with being shut down with no power and with no notice, as an accepted tool to integrate renewables. It bears little resemblance to “interruptible supply contracts,” because in that case the recipient knows it is going to happen to them if they’re “naughty” and use too much power.

This is a great subject. Please keep these storage articles and discussions coming, and thanks for calling me on “never” :)

Stan, I fully agree with nearly all your excellent comments on David Appleyard's article about power stability in Germany (and all around). Trouble is brewing even while only 13% of 2012 generated MWh in Germany came from wind and solar.

Take a look at http://www.agora-energiewende.de/service/aktuelle-stromdaten/stromerzeugung-und-verbrauch/ and you will see that a high fraction of the daily peak output of solar or wind is exported.

I only disagree strongly on one point that you make. Storage at an affordable price and with a reasonable footprint WILL happen because it is so absolutely necessary and as Germany is demonstrating.

Scores of processes are under development, based both on mechanical and electro-chemical solutions. As an example, take a look at www.eosenergystorage.com. Yes, there are lots of dead bodies in the vicinity of rechargeable zinc-air. But this looks likely to make the cut at a fraction of the cost of new pumped hydro (which does get built) and a tiny fraction of the footprint.

I am following these professionally, having, until recently, been sales and marketing director for Prudent Energy (vanadium redox flow) in the EU. This technology is achingly close to commercial but has, with the exception of an interesting case in California, not yet made the cut outside China.

Re: NG price instability. I moved back to my home state of Texas when Barnett shale was taking off, and did some pipeline permitting among other things.

NG has a much more variable price than coal, simply because it is not solid at room temperature. It is therefore much harder to transport (pipeline or LNG shipping) and store so as to phase with market prices. Investment in exploration and development similarly lag with market price.

However, I am not sure I agree with your statement that it will never happen.

I dare say many people cited the high costs of the early mobile telephone, or the earliest motor cars, while they expressed similarly negative sentiment. And to some extent they were right. Early cars and phones were clunky, expensive and generally a bit rubbish. But today we all know that over the years costs have fallen to the point where now just about everyone has one. And certainly no-one questions whether they are useful - even essential - components of modern life.

Load shedding or interruptible supply contracts are another tool which can be used to provide flexibility - I am not advocating simply switching off communities but I see no reason why some organisations couldn't shift peak loads to more convenient - in terms of power supply - periods. They don't necessarily have to go out of business to do that and may even secure a competitive advantage with low-cost power in return for that flexibility.

Rather than investing in hardware to keep German power out of Poland, as you claim, perhaps an approach which would enable Poland to maximise use of Germany's excess capacity (again low cost) is possible rather than impossible?

My point is that by creating a mechanism which incentivises 'stability' we are able to accelerate the move to successfully address some of these undoubted variability issues. The solution will take, I believe, a mix of technologies and techniques, some of which have probably not been invented yet.

Great article. I hope you had a chance to read my post on Germany on another article here. I’m going to reiterate some of it here.

Unfortunately, Germany and much of Europe is kind of between a rock and a hard place on NG, which is, at once, better on C02 than coal, but, I believe largely supplied by Russia and because of issues I cannot intelligently put down in print here as well as others, considerably more expensive and particularly iffy on dependable supply (someone please critique that), than coal and much, much more expensive than US fracked gas. It is the opposite here in the US.

But I must strenuously disagree with some of your last comments and put them in logical context of our problems in energy.

1. “Storage” It will NEVER happen. If viable, why haven’t the Europeans deployed it yet? Are we smarter than them? Not likely. Have you looked seriously at cost per MWh and energy densities of this (non) solution? I highly recommend getting out a calculator and running the numbers, based on 24MWh of storage at the Duke Energy Notrees battery facility in Texas (largest in the US) and then multiplying out to a very, very large number likely needed. Do you realize that on a hot summer day, my state of California demands on the order of 600,000MWh of energy in 24 hours?? Now compare 24 with 600,000. That infinitesimally small facility (24MWh) cost $44 million. We’re talking about storage dollar costs where the number “trillion” may become necessary and stacking batteries in rows stretching over the horizon. It won’t work.

2. “Load shedding” Seriously?? That means shutting your power off, period. No lights on at home, no cooking, no clothes washing, no heat, no AC, no electronic entertainment, etc., and factories/businesses shutting down, with bankruptcies, and no paychecks—it’s that simple. How can you give that as a viable solution?

3. “Multinational trade and transmission” That’s already happening in some cases when nations don’t want it to and regressing and stopping between other nations when some desperately want it to happen. The Danes are buying Swedish nuclear power because their wind machines stop turning all the time. But they promised themselves they would really not do that and rather go heavily with renewables until the terrible reality of wind intermittency set in. And then the Poles are installing interrupting hardware to actually keep German power out of their country when Germany produces TOO much power, leaving the Germans desperate to find a place for their intermittent power that is not intermittent enough when they’re all turnin’ (wind) and they’re all burnin’ (solar). It will never work, David. The writing is on the wall in Europe. The only question is when many in the US will admit a wrong choice for their world view before they looked at the technical realities of renewables, and do an about face back to reality.

4. The market gives NO investment boost when artificial incentives are present. Another article on this site just cited three more solar bankruptcies. They can’t even stay in business while chasing easy, artificially created subsidy dollars.

5. Have you read the Spiegel interviews with Stephan Kohler yet? Please do.

6. You made my points better than I could in the body of the article, and it was a good article. You will never have a 100% renewable solution unless you want to sit around a campfire and liquidate a large portion of the world’s population.